Scarcity: Why Having Too Little Means So Much is a 2013 book by behavioural economist Sendhil Mullainathan and psychologist Eldar Shafir. The authors discuss the role of scarcity in creating, perpetuating, and alleviating poverty. The book also proposes several ideas for how individuals and groups of people can handle scarcity to achieve success and satisfaction.
Introduction
The book begins with Sendhil's account of his daily life, particularly his feelings of being overworked. He discusses a framework for dealing with existing obligations, while managing new requests and opportunities.
The authors introduce two important concepts: time and money. Managing one's time and money requires constant vigilance, and one's failure to manage that process often results in missed deadlines and overdue bills. The authors define scarcity as the feeling someone has when they have less of a resource than they perceive they need. They explain that scarcity forms a common chord across all of society's major problems. They emphasize that scarcity is hardly transient, but instead a concept that constantly absorbs people and has profound effects on human behavior, emotions, and thinking.
The authors also disclose that their decision to write and publish Scarcity originated from an opportunity several years earlier to write a single chapter in another book about the lives of low-income Americans.
Part One: The Scarcity Mindset: Focusing and Tunneling
Part One begins with the aspects and role of scarcity in human life. Scarcity affects the functioning of the brain at both a conscious and subconscious level, and has a large impact on the way one behaves. The authors suggest that scarcity has a tendency to push us into a state of tunneling: a focus primarily on the scarcity of a resource, and a resulting neglect of everything else “outside” the tunnel. When in a state of tunneling, one automatically reverts to the immediate scarcity and concern at hand, which often is to one's detriment. The underlying mechanisms that contribute to tunneling are discussed, such as goal inhibition: focusing on immediate goals (concerns) at the expense of considering how to achieve long-term goals. The authors utilize the term tunneling tax to describe the cost of the things one has forgone in order to satisfy tunneling. Usually the effects of tunneling are dire, and result in long-term consequences.
However, scarcity doesn't only produce negative effects: it can also lead to a focus dividend, a situation in which someone experiences an increase in productivity as a result of being so acutely focused on a single pursuit. Thus, scarcity has both positive and negative effects, depending on whether it causes an individual to neglect important factors in their life such as housing, insurance, or other fundamental needs or to achieve goals efficiently.
Scarcity also takes a toll on bandwidth, the cognitive space to think and process problems and come up with solutions. A lack of bandwidth inhibits the most necessary functions and capacities for everyday life such as fluid intelligence and executive control. Its effect on human bandwidth highlights the impact of scarcity on the way people behave, think, and make decisions. Ultimately, left unchecked, scarcity can make life a lot harder and can amount to a serious burden.
Part Two: Scarcity Creates Scarcity
Scarcity functions as a cycle and there are various ways in which individuals enter, get trapped in, and exit the cycle.
Slack, the leftover resources (money, time, etc.) available to an individual for expenses that may arise, is the most important contributing factor to the scarcity cycle. Individuals with slack and those without it are impacted in very different ways. For low-income individuals, each dollar spent has a greater impact on their budgets and is therefore worth more. For this reason, low-income individuals pay greater attention to and seek out specific prices and discounts and more frequently try to assess the opportunity costs of transactions they engage in. However, with fewer resources, low income individuals experience juggling: the complex mechanism in which individuals patch crises as they arise by constantly shifting their resources according to what is needed most imminently. Juggling further cements low-income individuals’ economic status and their place in the scarcity cycle.